This NPR is one of three that U.S. regulators have issued to implement the Basel III risk-based capital standards. It covers the “standardized” approach that directly governs all but the very largest banks addressing risk-weighted assets (RWAs) in part changing the rules to comply with the Dodd-Frank requirement to delete references to credit rating agencies (CRAs). The revised RWAs proposed here are generally more stringent than those now in effect and, in several cases, also tougher than those required under the global capital standards. In the U.S., these standardized RWAs set the floor for risk-based capital at all banking organizations, in contrast to the Basel approach allowing advanced banks to hold less risk-based capital if internal models justify doing so. Residential mortgages and securitization exposures are subject to perhaps the most stringent capital hikes, but equity holdings, certain types of commercial real estate and derivatives-exposures also face stiff new capital charges (with the latter complicating use of central counterparties). This NPR also mandates disclosure and new corporate-governance practices for the top-tier parent of a bank with over $50 billion in assets not under the advanced approach.
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